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We don't need startups, we need Digital-Mittelstand

2025-02-247:40137236mertbulan.com

While the German economy is stagnating, Digital-Mittelstand may offer a solution.

Label it a cargo cult or something else, but countless nations strive to replicate the magic of Silicon Valley. The typical approach involves politicians designating a city and branding it as the “Silicon Valley of [Country Name].” They establish technology parks, offer financial incentives, and hope for the emergence of trillion-dollar enterprises. Yet, no country has succeeded in creating its own Silicon Valley. Why? Either these leaders fail to grasp the nuances of what made Silicon Valley what it is, or they lack a deep understanding of their own nation’s cultural fabric.

From my perspective, after a decade of closely observing the tech industry and studying the success stories from the Valley, I can confidently state that Silicon Valley cannot be cloned elsewhere. The reason is simple: Silicon Valley isn’t merely a hub of companies, tax breaks, and venture capital—it’s a unique ecosystem driven by culture. It’s a magnet for individuals from diverse backgrounds united by one shared ambition: make a dent in the universe. These people, drawn by the dream of joining the elusive three-comma club, relocate there and pour everything they have into making it happen. While many fail, the presence of so many success stories inspires them to believe they can be next.

Why German Culture Clashes with Startup Culture

In Germany, the cultural landscape is strikingly different. Few people are driven by the ambition to “change the world”—perhaps because they feel they’ve already contributed their share as a nation. Wealth and its public display aren’t as celebrated here, which is why it’s difficult to name a prominent German billionaire off the top of your head without checking the internet.

However, if you’ve ever used a product marked “Made in Germany,” you’ll understand what German culture truly values: mastery of a craft and uncompromising quality. You won’t find many Germans willing to sacrifice their health or personal milestones—like the birth of a child—for work, or to forgo their well-earned vacation in Mallorca. They’re not the kind to release half-baked products and patch issues later, nor are they likely to push for higher prices just to fatten shareholders’ returns. The average German—apart from those who’ve left the country and morphed into “tech bros”—isn’t particularly moved by shareholder value, especially when the Basic Law of Germany begins with “Human dignity shall be inviolable.” The entire culture fundamentally opposes many hallmarks of the typical startup ethos.

This cultural divergence also explains why it’s difficult to name successful German startups on par with Airbnb, Uber, or Stripe—let alone tech giants like Google, Facebook, or Amazon. And there’s little indication that this will change anytime soon.

Understanding Germany’s Mittelstand

If you’re unfamiliar with Mittelstand, it refers to small and medium-sized enterprises (SMEs) in Germany. While there’s no formal definition, these companies typically have fewer than 500 employees and annual revenues under 50 million Euro. What sets Mittelstand apart from SMEs in other countries, however, is their laser-sharp focus on a single niche, in which they excel. A significant portion of their income comes from exporting high-quality goods. This specialization and export-driven model makes Mittelstand businesses exceptionally resilient and stable, even during economic turbulence. By catering to super-specific markets with few competitors worldwide, demand for their products remains steady, no matter the economic climate.

If you’ve ever worked with Mittelstand companies, you’ll know that many have a long queue of customers waiting for their products. It’s not uncommon to wait months—or even years—for an order. Yet customers are willing to wait because they know these businesses either produce the best quality or are the only ones making the product at all. This dedication to quality and niche expertise explains why Mittelstand accounts for around 30% of Germany’s exports.

The challenge, however, is that Mittelstand companies primarily focus on physical goods. Unlike major tech giants, they can’t enjoy the massive profit margins of producing digital products with zero marginal costs. This reliance on physical goods contributes to the widening GDP gap between Germany and the U.S. Yet German policymakers have done little to close the gap. Instead, they’re either trying to replicate Silicon Valley’s playbook or pivoting their attention to renewable energy. The former won’t work due to Germany’s cultural differences, and while renewable energy is a worthwhile pursuit, it won’t generate the high profits that come with digital innovation.

That’s why I believe a new approach is needed—a concept I call the “Digital-Mittelstand.”

How Digital-Mittelstand Fits Germany’s Culture

While startups often begin with a focus on creating a minimum viable product (MVP), they tend to evolve into growth-hungry, investment-driven machines. Consider Spotify: it started as a music streaming service but has since expanded into podcasts and audiobooks. Netflix, synonymous with video streaming, has now ventured into gaming. This expansive growth strategy stands in stark contrast to Mittelstand’s ethos, which centers on focus, mastery, and sustainability. Mittelstand companies prioritize doing one thing exceptionally well, guided by a core ideology of longevity and conservative, long-term financial planning.

Most startups are built with the goal of either being acquired by a tech giant or going public. Mittelstand, however, aims to create lasting value for customers and employees—not shareholders. Startups also demand extreme dedication, often expecting employees to work 60–80 hours a week with little regard for work-life balance. In Mittelstand, employee well-being is a priority, encouraging a healthier balance between work and personal life. Even in today’s highly competitive AI industry, the startup world thrives on cutthroat competition. Mittelstand, by contrast, operates in niche markets with limited competition due to their specialized products.

Given these cultural and structural differences, I believe the traditional startup model won’t work in Germany. Instead of chasing a Silicon Valley model that no other country has successfully replicated, Germany should focus on developing the Digital-Mittelstand. This concept seamlessly aligns with both the German cultural ethos and the digital economy.

Creating a digital product doesn’t require massive capital investment—a small team of a designer and a developer can be enough to launch something meaningful. With fewer employees, companies can prioritize long-term goals, refine their product iteratively, and maintain lean operational costs. Once the product gains traction, the zero-marginal-cost nature of digital products allows them to scale without incurring significant additional expenses. Unlike startups that prioritize rapid growth or shareholder appeasement, Digital-Mittelstand companies can focus on work-life balance. If they generate enough revenue to cover expenses and fund leisure activities, that’s often sufficient for many Germans—a stark contrast to the high-pressure growth culture of Silicon Valley.

This model also aligns perfectly with Germany’s geographic and cultural diversity. Consider Germany’s population distribution compared to Turkey, for example. Both countries have similar populations (around 85 million), but even Gaziantep—my hometown and the sixth-largest city in Turkey—has a higher population (2.2 million) than Hamburg, the second most populous city (1.8 million) in Germany. This balanced distribution, which mirrors the Mittelstand’s industry diversification, contributes to Germany’s economic resilience. In contrast, the most populous city in Turkey, Istanbul’s dominance of Turkey’s economy (30% of the GDP) creates a single point of failure, especially with the looming risk of a major earthquake. A similar risk exists in highly centralized economies like London’s (25%).

Many Mittelstand employees live in small cities near their companies’ facilities. Digital-Mittelstand, however, can leverage remote work to further reduce costs. Employees could live in small towns, enjoy lower living expenses, and maintain a high quality of life thanks to Germany’s good transportation infrastructure. Remote work also translates into lower personnel costs, typically the largest expense for any startup. By tapping into these advantages, Digital-Mittelstand could achieve both profitability and sustainability without compromising employee well-being.

What Can Digital-Mittelstand Produce?

If you’re already sold on the Digital-Mittelstand concept, let’s explore the potential products they can create. There’s a wide range of possibilities:

  • Mobile apps and games
  • Web designs and templates
  • Graphic designs, fonts, icons, and 3D models
  • 3D product designs for 3D printers
  • Open-source software projects
  • Machine learning models
  • Custom data analytics and visualization tools
  • VR/AR experiences
  • Online marketplaces
  • Subscription-based newsletters, podcasts, and other type of contents
  • E-learning platforms, video courses, etc.

These are just a few examples, and many can be classified under Software as a Service (SaaS). While these products don’t require massive capital investments, they do rely heavily on expertise. By focusing on niche markets and high-quality offerings, Digital-Mittelstand companies can carve out profitable, sustainable businesses. With minimal competition and zero-marginal-cost scalability, this model offers a long-term, balanced approach to growth and innovation.

What Should Be Done Next?

It wouldn’t be fair to end this discussion without offering concrete suggestions for the government. Rather than pouring large grants into startups with the hope of generating returns for shareholders, the German government should consider introducing tailored incentives to foster the development of Digital-Mittelstand.

1. Salary Grants

Germany has a wealth of talent—top-tier programmers, designers, and digital experts—many of whom currently work for startups or traditional corporations. A government program could provide salary grants based on experience, allowing these individuals to dedicate time to developing a digital product without compromising their quality of life or financial stability. For example, an experienced software developer with eight years of experience could receive a grant equivalent to their annual salary. Since about 42% of that money would return to the government or social system via taxes, the risk is partially mitigated. Unlike startups, where a large portion of funds often ends up spent on advertising with tech giants like Google and Facebook. If the product begins generating revenue within a year, the grant could be extended for another couple of years to help reinvest in further development.

2. Simplify Bureaucracy and Regulations

Startups often bleed money on legal and accounting fees due to the complex regulatory landscape. The government could reduce this burden by creating a single, user-friendly portal where Digital-Mittelstand companies can register, report revenues, and record expenses. This system should provide clear explanations of what qualifies as an expense to minimize confusion and unnecessary compliance costs. Additionally, Digital-Mittelstand companies should be exempt from certain regulations until they cross a specified revenue threshold, allowing them to focus on product development rather than navigating red tape.

3. Expand VAT Exemptions

Currently, small businesses (Kleinunternehmen) in Germany enjoy a VAT exemption up to 22.000€ in revenue. This threshold should be raised to 100.000€ for Digital-Mittelstand businesses. A higher exemption limit would allow these companies to either offer competitive pricing or increase profit margins, enabling them to reinvest in their long-term goals.

4. English Language Support

Providing full English-language support for the Digital-Mittelstand system would make it easier for those already working in Germany to start their own businesses. It would also attract international talent to move to Germany for this opportunity. These individuals could first gain local experience by working for traditional companies. Thanks to the Blue Card visa for highly skilled workers, they can obtain permanent residency after about two years, allowing them to launch their own Digital-Mittelstand ventures. This would help traditional companies find talent and digitize their operations while encouraging more entrepreneurial risk-taking in Germany, as those relocating from abroad are often more willing to take risks.

With the federal election in Germany now complete and a new government set to take office, I hope this post reaches those in positions of power. I hope they’ll consider this approach, focusing on what makes Germany the third-largest economy while maintaining a great work-life balance, rather than attempting to replicate Silicon Valley.

Of course, despite what the title suggests, I’m not entirely dismissing the startup concept. There’s still a need for companies that require significant capital and rapid growth. However, I firmly believe that Digital-Mittelstand should be the government’s main focus. Some of these companies might even grow to become the digital equivalents of tomorrow’s Siemens, Bosch, or Zeiss.


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Comments

  • By pembrook 2025-02-248:595 reply

    The authors examples of “Digital Mittelstand” companies are not businesses at all but tiny “creator economy” side projects.

    These do not scale to 30% of GDP in the same way high value B2B industrial equipment does (in manufacturing you happily pay $100,000 for a piece of machinery because it can turn inputs into more valuable outputs at scale).

    Instead of coming up with incorrect ideas about what the government should “encourage” from the top down, what if European elites focused on cooperating more with their neighbors to open more opportunities and meanwhile let the peasants (the market) figure out the most productive and profitable uses of their time.

    If Europeans can’t figure out new valuable areas where they can contribute to the world, than their system isn’t as clever or morally righteous or fantastic as they think it is. I believe if allowed the opportunity, the people would find this positive-sum value to be created. Who do you think founded all the Mittelstand in the first place?

    • By impossiblefork 2025-02-2410:126 reply

      Yes, but what if the big-software type economy isn't actually that useful?

      Maybe you can grow it to 30% of GDP if you start doing a bunch of bad stuff, but if it can be replaced by open source local stuff-- if it's possible to simply kill facebook, Microsoft etc. and replace them with Linux together with a couple of not incredibly expensive software packages developed to provide a substitute, then why should we have a big-software economy?

      I think this is more the idea. The interesting thing isn't to build a European Facebook or an EU SaaS economy, it's to kill the whole concept, globally.

      • By pjc50 2025-02-2410:451 reply

        > Maybe you can grow it to 30% of GDP if you start doing a bunch of bad stuff, but if it can be replaced by open source local stuff-- if it's possible to simply kill facebook, Microsoft etc. and replace them with Linux together with a couple of not incredibly expensive software packages developed to provide a substitute, then why should we have a big-software economy?

        People have been saying this for twenty or thirty years, and in the meantime the economy has coalesced further into fewer American megacorps. It's a mirage. Things do not work that way.

        (AI is going to be exactly the same: the huge corporate valuations are predicated on there being exactly one big AI company which takes a significant chunk of value from all word-based work being done today)

        • By fsflover 2025-02-2412:202 reply

          All this happening in the US due the lack of good anti-monopoly regulations.

          • By FirmwareBurner 2025-02-2412:24

            This is by design. US government isn't gonna kneecap it's most valuable companies now, since they're also monopolizing the international tech markets including the European one, and as long as China isn't taming its own monopolistic giants, then the US has no incentive to do it to themselves considering the economic war they're in now.

            The US government threw the book at Microsoft in the 90s when tech was a small slice of the US GDP and it had no international competition, but today the tech sector is the biggest engine of GDP growth in the US, so there's no way the US government is gonna throw a spanner in that just to be richeous.

            In the current economic and political climate, having a monopoly on monopolistic giants like the US does, is much better than having no monopolistic giants like the EU, since nice guys do indeed finish last.

          • By tarsinge 2025-02-2414:09

            Exactly, enshittification is creeping everywhere, EU should not follow a model that is breaking up in front of us.

      • By thiago_fm 2025-02-2516:35

        I 100% agree.

        A European FB or alternatives for literally every US Big Tech product already exist, all of them OSS.

        Even search (Google) now became much easier to replace with LLMs.

        What it misses is solving the chicken and egg problem, basically getting people to use it.

        Without its people, social networks are useless. The same is search.

      • By milesrout 2025-02-2410:203 reply

        Firstly, Linux isn't made for free by hobbyists. The biggest contributors are profitable, largely American tech companies. Intel, AMD, even Microsoft is now a contributor.

        Secondly, the idea that you can just replace the entire software industry with Linux is... Are there even words to describe this? Linux is just an operating system. You can't replace a whole industry with "a couple of cheap packages."

        • By impossiblefork 2025-02-2410:301 reply

          I'm not saying that you can replace the entire software industry by Linux, but you can replace Windows with Linux, you can build simple locally run software to replace many of the well-known services, you can put some efforts into creating local clones with greater adaptability to match the biggest SaaS services, etc.

          Basically, to go after the easy 90%. Then we go from a world with data in the cloud, massive advertisement statistics gathering etc., to a world where people mostly use computers to solve concrete physical problems in their environment and where networks are distributed, e-mail like or like a facebook where every participant stores a substantial amount of information locally in plaintext and has it interpreted by a desktop app, where he has no feed with the content decided by others, but chooses what he has the computer show him, etc.

          Just look at telecom. How much complexity in the protocols isn't there just because people have to have their resource usage monitored so they can be billed for it, and for this to be settled between telecom companies?

          The software to kill SaaS and Facebook might be so simple that a couple of people could write it by themselves. It's like that local government 'if you have regional govt they decide it all in Nottingham probably in a couple of meetings. Complete amateurs.' That's where I think we could go, but with software instead of the UK civil service.

          It also fits really with with the coming of LLMs etc. You can just store of a lot stuff in plain text and have this super-fast reader process it all. Instead of lots of software, just huge amounts of plaintext that the machine can understand.

          • By pjc50 2025-02-2410:421 reply

            > The software to kill SaaS and Facebook might be so simple that a couple of people could write it by themselves

            Today's version of the HN classic "no wireless, less space than a Nomad, lame" (on the launch of the original iPod)

            • By fsflover 2025-02-2413:261 reply

              Except Mastodon already exists.

              • By ben_w 2025-02-2417:081 reply

                So did the Nomad.

                Look, we know that the software to kill Facebook is indeed so simple that a couple of people could write it by themselves… because Facebook itself was written by Zuckerberg and four friends while at university.

                The "software" part of this is not hard. It's everything else that is hard.

                • By jononor 2025-02-2417:21

                  Facebook in 2025 is not at all the same software as in 2005. Nor FB the business. The market is also forever changed. Not that this detracts from your main point. The tricky part is not the software.

        • By citadel_melon 2025-02-2418:11

          The US forcing all government agencies to use open source software would save taxpayers money. Additionally — in tandem with other countries following suit — the policy would create the incentive for governments to contribute to OS development, and thus, the OS community would not need to rely so heavily on industry for Linux development, dismantling your implication that OS software is contingent on big-tech’s existence.

          Switzerland already has a policy that all government agencies need to use open source software so the policy I mention isn’t a pie-in-the-sky theoretical.

        • By herbst 2025-02-2410:29

          You can easily replace simple apps like Facebook, WhatsApp or Snapchat with a couple of cheap packages.

          Somebody remember elgg? Or buddypress? None of these mega cooperations have software that can't easily be copied.

      • By pembrook 2025-02-2410:23

        You might be right.

        The US might always dominate software (which could turn out to have no moat) and China might always dominate manufacturing.

        But neither industrialized manufacturing or software even existed 200 years ago. I'm pretty sure we haven't hit the final destination in human history where there's no problems left to solve.

        There's this one weird "AI" thing people are talking about. Could be something people find useful you could work on?

      • By flanked-evergl 2025-02-2410:382 reply

        Germany has a big-nothing economy right now. Compared to that, even a small-software economy is useful. Germany can't live on everyone else's money indefinitely, at some point everyone else is going to get fed up that they have to be paying more tax and higher energy prices because Germany can't sustain itself.

        • By touwer 2025-02-2410:561 reply

          You should read up before making grandiose statements like that. Totally not true. https://www.economist.com/finance-and-economics/2025/01/30/c...

          • By flanked-evergl 2025-02-2411:30

            A theoretical recovery is not an actual recovery, and if history has any lessons, then it's quite unlikely that Germany could economically recover without more US money, which is not coming.

        • By impossiblefork 2025-02-2410:432 reply

          What?

          They literally build machines that everybody needs to live. They make everything, all sorts of little of bits you need. If you need a special chemical reactor that resists some weird thing, it's probably from Germany.

          • By flanked-evergl 2025-02-2411:30

          • By touwer 2025-02-2410:582 reply

            Indeed. Zeiss lenses. Medical equipment. Boss. Siemens. The only thing that's really lacking is ict and ai. But that can be fixed

            • By FirmwareBurner 2025-02-2412:20

              Niche businesses like Zeiss Lenses can't support the economy of the EU of 450 Milion people, especially that they mostly hire highly specialize people with PhD and up.

            • By flanked-evergl 2025-02-2411:311 reply

              Having a company that makes lenses, even really good ones, is not the same as having a viable economy.

              https://en.wikipedia.org/wiki/German_economic_crisis_(2022%E...

              • By impossiblefork 2025-02-2412:341 reply

                So, you're basically that, if GDP is not up, or the companies are not doing well, it doesn't matter that they're actually building genuinely useful stuff without which all sorts of people would be in major trouble?

                Germany has problems-- immigration, energy etc., and maybe some companies have problems, but the US has put huge efforts into making something even a tiny bit like the German companies that are actually building stuff, presumably because its leaders know that you can't eat software services no matter how overpriced they are-- in the end actually building things is how you get things, once you are no longer forced to get some critical vitamin through trade, and we are there now.

                • By flanked-evergl 2025-02-2413:311 reply

                  I'm saying that not even the nicest, rarest lenses in the world are a replacement for a viable economy.

                  And you can't eat lenses either, and people who do grow food also use software, and so do everyone else that makes about 90% of all the other stuff other than food that constitutes the German economy.

                  • By ginko 2025-02-2415:471 reply

                    • By flanked-evergl 2025-02-257:111 reply

                      You know what is not a substitute for a viable economy? Everything except a viable economy. Zimbabwe is also a net exporter of food [1][2].

                      [1]: https://wits.worldbank.org/CountryProfile/en/Country/ZWE/Yea...

                      [2]: https://wits.worldbank.org/CountryProfile/en/Country/ZWE/Yea...

                      • By ginko 2025-02-2511:151 reply

                        Germany has a viable economy. It's one of the strongest, most diverse in the world. It's in a recession right now, but we're talking about fluctuations in the 1-percent range here.

                        If you think Germany is anything close to a failed state then all I can tell you that you either fell for lies or intentionally spread lies yourself.

                        • By flanked-evergl 2025-02-2513:451 reply

                          A change from 3.7% to -0.3% is not in the 1-percent range. It's a decline of more than 100%, as all the growth is gone. Their economy has been sliding for years, the only change in trend was when they were helicoptering covid cash. They are done for, they won't recover.

                          • By thiago_fm 2025-02-2516:39

                            They can easily recover if they do like the US and run a fiscal deficit to dig up holes and fill them up, if GDP is all you need.

                            They can as well make insulin $1000 a pop, so everybody with diabetes will need to pay more, GDP up!

                            Oh wait, Germany doesn't even have a huge chunk of their population with diabetes because Germans don't live off mountain dew and cheetos...

                            Definitely, Germany has no future!

    • By jsiepkes 2025-02-2410:301 reply

      It's probably more of cultural difference. It's common in the US to build companies like a lot of houses are build in the US.

      In the US houses are often build from wood and plaster and have a high chance of being knocked down by a storm. Companies in the US are often build on a ton of dept (and never making a profit is not considered "weird") and have a high chance of being knocked down by a storm.

      In Europe people like to build houses from brick and concrete. Companies in Europe are often expected to be profitable at some point and be able to wither a storm.

      • By pjc50 2025-02-2410:511 reply

        US vs. EU building materials is actually locally determined - there's a lot more forest in the vast empty spaces of the US and Canada, hence all the cheap wood.

        Same for oil. Same for e.g. the UK steel industry. I think people underestimate the extent to which the EU either doesn't have the same level of natural resources, or has used them up. There's a reason the last time that Germany got serious about resource independence it tried to invade Azerbaijan despite the USSR being in the way.

        • By touwer 2025-02-2411:011 reply

          Wut?

          • By big_paps 2025-02-2414:13

            This was quite some times ago… Hitler was trying to get the oulnin the caucasus

    • By hkt 2025-02-249:342 reply

      > If Europeans can’t figure out new valuable things to contribute to the world, than their system isn’t as clever or morally righteous or fantastic as they think it is.

      Most Europeans have access to some kind of comprehensive public health offering, food that isn't killing us quite as quickly as American food does, etc. It is a system which requires thought and design that markets can't offer, since they're innately uncoordinated (the exception being oligarchies).

      The idea that the market can be described as regular people deciding things is, by the way, fairly funny. We don't get to choose what gets made, and have to select from a buffet of often pretty poor options served up to us by people who are by and large not interested in anyone's wellbeing but their own.

      Most of Europe recognises on some level that not everything that counts can be counted. That's the real difference. Regulation of new, high risk industries makes perfect sense from that perspective.

      • By pembrook 2025-02-249:491 reply

        > The idea that the market can be described as regular people deciding things is, by the way, fairly funny. We don't get to choose what gets made, and have to select from a buffet of often pretty poor options served up to us by people who are by and large not interested in anyone's wellbeing but their own.

        Is Europe more communist than I thought? You do realize if you aren't happy with the options on offer in the market, that's an opportunity for you to provide a valuable service to your fellow humans...and yes improve your own wellbeing at the same time...which is the point of a market?

        Who do you think started all of the German Mittelstand companies in the first place?

        • By Zanfa 2025-02-249:581 reply

          That’s a bit naive. There are a lot of markets that are effectively impossible to enter without massive amounts of capital and current players are selling below cost.

          • By pembrook 2025-02-2410:094 reply

            The vast vast vast majority of companies do not sell a product below-cost.

            And if the customers are not willing to pay more, it sounds like they're actually happy with the current offering and that's not an area that your fellow humans would find useful for you to work on.

            Yes, one of the responsibilities of a founder is fundraising. If you can't sell people on investing in your vision that is...a somewhat bad sign.

            • By Zanfa 2025-02-2410:261 reply

              > The vast vast vast majority of companies do not sell a product below-cost.

              Maybe in terms of the number of companies, but in terms of percentage of market size, I'm not sure. Literally the entire social media adjacent market at the moment, including instant messaging is about offering a service below cost, killing any chance of non ad supported platforms.

              > And if the customers are not willing to pay more, it sounds like they're actually happy with the current offering and that's not an area that your fellow humans would find useful for you to work on.

              Not necessarily. This would be true in a world of spherical cows and rational consumers, but that's never going to be the case. There's other considerations like walled garden lock-in and network effects that consumers have no control over.

              > Yes, one of the responsibilities of a founder is fundraising. If you can't sell people on investing in your vision that is...a somewhat bad sign.

              So it's not about "just go out and build a competitor", but something much more complex, as reality usually is. Even access to venture capital can differ by orders of magnitude between markets.

              • By pembrook 2025-02-2410:391 reply

                This comment reads like a very rational, risk-averse person convincing themselves why they should never try doing anything new or interesting.

                Yes, markets are democracies which are messy and complicated and competitive and hard and not as easy as issuing top-down decrees from the elite.

                • By Zanfa 2025-02-2410:471 reply

                  Right, so we agree that a product being successful has little to do with being better or worse than competitors and more with other externalities?

                  • By pembrook 2025-02-2414:381 reply

                    No, we do not agree.

                    In the short term irrationality can and does prevail in both markets and democracy. In the long term, the best product and ideas always win. This is why both democracy and markets are durable.

                    Paraphrased differently, this is the weak-form of the efficient market hypothesis. All decentralized processes have some level of gravitational pull toward efficiency. They're not perfectly efficient, obviously. But they trend in that direction on long time scales, unlike the alternative which is being anchored only to the whims of the fickle elite.

                    • By Zanfa 2025-02-2415:48

                      > In the short term irrationality can and does prevail in both markets and democracy. In the long term, the best product and ideas always win. This is why both democracy and markets are durable.

                      If there’s anything to learn from recent developments it is that democracy is fickle and definitely not the default state. But to me you’re still conflating commercial product success with the product being good or bad. If it was about the product, fundraising or marketing shouldn’t be among the biggest obstacles, since they have nothing to do with product quality or consumer benefits.

            • By TFYS 2025-02-2410:181 reply

              > And if the customers are not willing to pay more, it sounds like they're actually happy with the current offering and that's not an area that your fellow humans would find useful for you to work on.

              People would need to have perfect information about all the products they buy in order to truly know if they're happy with them. If they knew and saw first hand all the effects that a product has (poor working conditions, poor pay, environmental destruction, effects on health, etc) they might not actually be happy with these products. It's impossible to research all of these things on everything you buy, and therefore the market does not "care" about any of these things, only about the immediate effects that the buyer can feel.

              • By pembrook 2025-02-2410:342 reply

                If people would actually be happier with your solution that's simply a marketing problem, which is entirely solvable.

                But I think more often people delude themselves into thinking their thing is better (since it's their baby) when it actually is not, which no amount of marketing dollars can solve.

                • By TFYS 2025-02-2410:38

                  It's not just a marketing problem, because the amount of information you'd have to have in order to make a truly rational decision is beyond any simple marketing campaign. Your competitors would also be creating campaigns against yours, so how would a consumer be able to figure out the truth without impossible amounts of work?

                • By touwer 2025-02-2411:071 reply

                  I'm sorry but your view on the economy and society is really naive. As if everything could be solved by markets. Monopolies don't exist. Powers other than supply and demand (political, societal, geological, etc) don't matter. It's not that simple. Read some books of (old) economists or philosophers

                  • By pembrook 2025-02-2414:26

                    If you cannot argue your points succinctly here without ad hominem attacks, I presume they aren't strong enough to stand on their own.

                    A rebuttal of "markets don't work because monopolies might form!" doesn't make sense when the alternative is to make everything a monopoly in the form of top-down government control.

                    Even the Chinese Communist Party understands that markets are the best way to create value and growth.

            • By johannes1234321 2025-02-2410:37

              > The vast vast vast majority of companies do not sell a product below-cost.

              Tha tis true, as they won't survive.

              However an established company often has the ability to go on a price war, including selling under cost temporarily, to fight off an up starting competitor and preventing it from entering the market in any serious way. Once they give up, one can go back to higher prices.

              Thus only one who can compete is somebody who can use profits from other area, thus some already well established player in a related market.

            • By layer8 2025-02-2410:15

              The problem with many digital offerings nowadays, in particular those that dominate the end user market, is that the user isn’t the customer, but is the product (i.e., directly, or indirectly, ads). Another problem is oligopolies, like Android vs. iOS.

      • By emsy 2025-02-2410:03

        It makes as much sense as regulating nuclear weapons when you have none.

    • By ForHackernews 2025-02-2410:191 reply

      > If Europeans can’t figure out new valuable areas where they can contribute to the world, than their system isn’t as clever or morally righteous or fantastic as they think it is.

      I don't think it follows that unprofitable things are by definition not clever, righteous, or fantastic. This seems like a blinkered, American-capitalist viewpoint.

      • By milesrout 2025-02-2410:253 reply

        Profitable and valuable are synonymous. If something is more valuable than the inputs used to make it, then it is profitable to make it.

        Things being clever, or righteous, or "fantastic" (whatever that means) doesn't mean that people actually value them. That isn't what value means. Something is more valuable if you would give up more to have it. It is less valuable if you would give up less to have it.

        Basically, no, it is in fact definitionally true, not blinkered, and has nothing to do with America. All of Europe is just as capitalist as America, Britain, Australia, New Zealand, etc.

        • By cjfd 2025-02-2410:381 reply

          You are right. My partner and I often provide each other sex for free. We should stop that and both become sex workers in order to be valuable.

          • By pembrook 2025-02-2414:16

            Except you do not provide it for free. You provide it under the implicit transaction of your relationship, where you are both giving up value in other to get value.

            Try betraying your partners trust and cheating on them - or refuse to take care of your children. They will likely be upset that you aren't holding up your end of the bargain.

            Just because you haven't placed a price tag on your relationship and hate the idea of thinking of it that way due to modern cultural ideas of romantic love, doesn't mean relationships are not a transaction (historically in fact they did carry a price tag).

        • By BerislavLopac 2025-02-2410:511 reply

          > Profitable and valuable are synonymous.

          So your police, firefighters, the military, health services (not in the US though) and various charities are not valuable? That is an interesting take.

          • By mytailorisrich 2025-02-2411:141 reply

            They are valuable and they are also quite profitable (I am excluding "various charities" as that is too broad and fuzzy).

            The fact that the state may provide the majority of these does not mean that they are not profitable as private ventures. Why are they profitable? Because they are deemed very valuable!

            • By swores 2025-02-2411:221 reply

              In some countries they are not profitable, because they are publicly owned organisations not for-profit private ones, and they are run purely for the benefit they provide to society.

              Please re-read the comment you replied to with this context in mind (as their excluding the US was for this reason; though of course the US is not the only country foolish enough to allow profit motives to harm their healthcare, firefighting, etc. services) - the fact that some countries choose to allow profit extraction through these services does not mean that the non-profit versions have no value.

              • By mytailorisrich 2025-02-2411:321 reply

                Healthcare is a profitable industry in the EU. Security services are a profitable industry in the EU. There are private firefighting services in the EU. You can easily understand that in general terms all of these services are valuable and profitable to provide (because they are valuable!). The same goes for "military services"... Mercenaries and other "private providers" are a thing.

                You are completely missing the point. Whether a type of service has a state monopoly and thus no viable private market is also quite irrelevant to the general point.

                The general point is that people (i.e. "the market") are willing to pay for things they find valuable but not for things that they do not. That includes paying through taxes though because the payment is indirect it is more likely to not perfectly align with "value".

                • By swores 2025-02-2411:431 reply

                  I personally think it's you missing the point, though I suppose if I were missing the point I might not realise it!

                  The fact that some healthcare in some EU countries involves profit is irrelevant to my point & the point of the original comment you replied to. Neither of us were saying that the EU is a shining example of profit being out of healthcare (and in fact I was clear to state that the US is not a solo example on that side of things).

                  The claim we are disagreeing with is that profit = value and therefore lack of profit = lack of value.

                  Take UK firefighting services as an example. They are publicly owned and funded by taxes, and as such they are not designed to extract profit, just to be funded enough to provide the services needed. Does this mean they have no value? And in a hypothetical world where every country decided to shut down all private fire fighting companies and to fund publicly-owned ones, would that mean there is no value in any firefighting worldwide?

                  In my experience, people who argue against this model and in favour of for-profit businesses providing these services say that the profit motive leads to better efficiency, competition etc. (which I personally agree with, but that's a separate conversation). I don't think I've ever before seen anyone argue that lack of profit means they have no value.

                  • By mytailorisrich 2025-02-2411:52

                    There are profits made in the UK firefighting services. The fact they are (mostly?) funded by taxes is not key.

                    People are willing to pay for those services (and they do through their taxes as a result). People are paid salaries to provide those services (that's a basic form of profit). There are many commercial companies that provide equipments and even services to tax-funded firefighting services. So there is indeed "profit" everywhere. That is the big picture.

                    > I don't think I've ever before seen anyone argue that lack of profit means they have no value.

                    That's odd because it is a really basic concept.

                    In general socialised services (education, healthcare, firegighting, etc) are so not because they aren't valuable or profitable but because we think that they are so important that everyone should have access to them, even those who can't afford them.

        • By touwer 2025-02-2411:03

          I'm wondering from where you get these ideas? Which social media hell hole?

    • By abc123abc123 2025-02-249:304 reply

      Europe is dying. It is an old socialist relic, with a completely outdated model of reality. The successes of the extreme left and right shows that the political nobility are done.

      Sadly europe never realized that low taxes, capitalism and liberty is what drives wealth.

      I wonder if, in a generation, when the best brains moved to the US, asia and argentina, the continent will finally awake from its socialist slumber?

      Hong Kong managed to go from a peasant village to a global financial center in a generation or two. In theory, it should be possible for europe to do the same. But in order for that to happen, there needs to be insight into the sickness, and awareness of the cure.

      I'm happy I left. After I left high tax western europe I basically doubled my salary after tax! =)

      • By amunozo 2025-02-2410:571 reply

        Spain is flooded with Argentinians fleeing. Spain, which isn't even that good. Europe is still a much better place to live to the common people than anywhere else in the world.

        • By FirmwareBurner 2025-02-2414:52

          If you look for one, you can always find a worse place to live on the planet than your own, if you wanna make yourself feel better about where you live, however that's no excuse to be complacent and ignore the real issues your own place is facing. That's called coping.

          I want my country every year to be just a little better than it was the year before. If that's not happening and I need to resort to comparisons to failed developing countries to see it in a good light, then something is going wrong with it.

      • By pjc50 2025-02-2410:471 reply

        HK was a special case of being an intermediary port city. Same with Singapore. The European equivalents are Luxembourg and Monaco.

        • By notahacker 2025-02-2411:25

          Also HK and Singapore are intermediary port cities that made those general shifts by adopting policies inspired by Europe, in the former case whilst still being the territory of a European power...

      • By peterfirefly 2025-02-249:53

        Things are a lot easier if you are basically controlling a river delta (of a river with an absolutely huge hinterland).

        Same for the Dutch, btw.

      • By lyu07282 2025-02-2411:502 reply

        > Sadly europe never realized that low taxes, capitalism and liberty is what drives wealth.

        Honestly we have moved Europe so far past the post-political that I find it difficult to comprehend peoples politics nowadays. I wonder what people think "socialism" or "left" politics is now that everything has been so thoroughly depoliticized, I genuinely don't know. Is the EU "left"? I guess so? Is the IMF?

        • By pembrook 2025-02-2419:231 reply

          You can just look at the numbers. Percentage of GDP that is driven by government spending:

          China: 33%

          USA: 34%

          Germany: 50%

          Economically, modern Europe is more communist and exerts more centralized control than China. Might explain why the current class of European elites have presided over the greatest destruction of an industrial base since the Soviet Union.

          • By lyu07282 2025-02-259:53

            This is fascinating, do you think then the US (under Biden) is/was more communist (economically) than China is?

        • By ben_w 2025-02-2417:16

          By the Overton window of America, I think much of Western Europe is somewhere between "extreme left wing" and blank stares of non-comprehension at the still-present literal Soviet memorials that were never removed when the literal USSR fell.

          By the Overton window of Europe, I think the Democrats are "dangerously right wing, look at them being pro-gun". Certainly they are to the right of my personal Overton window, though perhaps I am projecting my own views on my fellow Europeans.

          Republicans of faint heart should avoid finding out how Trump gets labelled on newspaper front pages around here.

  • By hresvelgr 2025-02-249:304 reply

    I think Mittelstand is perhaps misdirecting away from a more interesting conversation. Reading between the lines, this highlights an inherent bias in the majority of American companies to provide service to extract value as opposed to providing service for public benefit. Simply put, it's "move fast and break things" versus "WE DO NOT BREAK USERSPACE."

    If you want to dig deeper, this is a consequence of America beginning in recent history as a frontier settlement, primarily attracting aggressive, adventurous go-getters to make their fortune. Extracting for personal gain was baked into the culture from the beginning and is an artifact that has persisted to this day.

    • By pjc50 2025-02-249:40

      > "move fast and break things" versus "WE DO NOT BREAK USERSPACE."

      I think this is a great analogy to explain the issues to this crowd, although I think there's also a lot of people here who would happily break userspace. And it's successful in a financial sense.

    • By andai 2025-02-2413:03

      It seems to me that all the America type Europeans already moved to America, and their departure only increased the cultural differences and made remaining more unbearable for the ones who were on the fence.

    • By gizmo 2025-02-2412:121 reply

      > "move fast and break things" versus "WE DO NOT BREAK USERSPACE."

      An alternative analogy is "binary search" versus "linear search".

      With linear search you don't risk overshooting your target, and it's less chaotic, but you also don't progress nearly as quickly.

      • By lesostep 2025-02-2413:291 reply

        I wouldn't say that it is a good analogy, since both types of searches in no way change the array they are searching in. While tech products do change lives of their users. Maybe lossless|lossy would be a better analogy?

        • By gizmo 2025-02-2417:11

          The state that changes is the location in the search space, in this analogy.

    • By milesrout 2025-02-2410:302 reply

      >Reading between the lines, this highlights an inherent bias in the majority of American companies to provide service to extract value as opposed to providing service for public benefit.

      American businesses do the same thing businesses do anywhere: try to generate more valuable products and services than they consume. It really is as simple as that. No value is "extracted" when you sell bread for more than it cost to buy flour, yeast, water, labour, and space to work. The idea that it is "extractive" screams to me of the lump of labour/labour theory of value idea, which is not just wrong but incoherent. Maybe that is not what you meant, but it is common for communists to claim that "all profit is extracted from workers' labour" and similar silly rubbish.

      • By wavemode 2025-02-2410:43

        You're glossing over the nuance. Selling bread for a profit is of course what any bread business will try to do. But only some bread businesses would be willing to increase profits by switching to cheaper ingredients, flimsier packaging, rushing production and lowering the quality of the bread.

        This isn't about communism vs. capitalism. It's about Airbus culture vs. Boeing culture.

      • By hresvelgr 2025-02-2410:48

        I'm taking about extracting value from consumers. Capitalism/communism is a straw man here. It's the attitudes that motivate product development.

  • By albertzeyer 2025-02-248:322 reply

    There are a lot of such companies already in Germany. Basically most small/medium sized IT companies in Germany fit that classification. So I don't really see how this is now a new approach. And I'm also not sure what is proposed here to be done now. Invest more into IT infrastructure? That's a goal that many parties claim to do since many years. Many people fully agree with this. However, currently, the main topic in Germany is again immigration. Second topic is economy, but the opinions on how to improve economy widely varies. Many of the more traditional parties want to invest more into car companies.

    • By raxxorraxor 2025-02-2410:23

      Nothing digitally can currently really prosper in Germany if it isn't an already completely finished consumer product (preferably as dumb as possible). There is capitalism, but there is no venture here. Although investors probably still see it differently, the average user has some form of primordial fear while engaging with any digital technology.

      Exception is R&D for the most part, but here these tendencies seem to be growing as well. Insane amounts of money are wasted to evade tech as much as possible.

      This has changed from only a decade ago where there was much more enthusiasm for tech. Now people are annoyed by it.

    • By fhennig 2025-02-248:512 reply

      > And I'm also not sure what is proposed here to be done now.

      The article lists 4 things under "What Should Be Done Next?" - Given your don't I think I can also be a bit snarky and ask: Have you read the article?

      • By albertzeyer 2025-02-248:59

        Yes I read it. I don't think these suggestions really help much, or are really new. E.g. simplify bureaucracy and regulations, that is what most parties already claim to do since many many years. I think many people really want that, but it seems to be difficult to really do this. VAT exemptions is probably also in the program of a couple of parties. English language is already pretty standard in many IT companies in Germany.

      • By tonyedgecombe 2025-02-2410:19

        >Have you read the article?

        From the site guidelines:

        "Please don't comment on whether someone read an article."

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